Discretionary central excise penalty: mens rea was no bar, and reduced penalty was upheld on the facts.

Penalty under Rule 96ZP(3) of the Central Excise Rules, 1944 was held to be discretionary, not automatically recoverable at the maximum rate in every case. The quantum could be moderated having regard to the delay in payment, the amount involved and the surrounding circumstances, and the concurrent reduction of penalty to 50% was upheld as not perverse. The plea that absence of mens rea barred penalty was rejected because the compounded levy scheme under Section 3-A was designed to secure timely duty payment and deter default. No substantial question of law arose for interference.

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Issues: Whether penalty under Rule 96ZP(3) of the Central Excise Rules, 1944 was mandatory at the maximum rate or could be reduced having regard to the facts and circumstances, and whether absence of mens rea excluded levy of penalty.

Analysis: The assessee was covered by the compounded levy scheme under Section 3-A of the Central Excise Act, 1944. The duty had been delayed, and the authorities found that the furnace attracted the higher rate of duty. The provision for penalty under Rule 96ZP(3) was held to be discretionary and not the minimum penalty in every case. The extent of delay, the amount involved and the surrounding circumstances were relevant in deciding the quantum. The contention that no penalty could be imposed without mens rea was rejected because the scheme was intended to ensure timely payment of duty and to discourage default. The concurrent reduction of penalty to 50% was not shown to be perverse, and no substantial question of law arose for interference.

Conclusion: Penalty was rightly attracted, mens rea was not a bar, and the reduction of penalty to 50% was upheld.

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